My Company

By Dan Berman

The great year just posted by corporate pension funds in 2013, in which they ended the 12 months 95 percent funded, seems even more impressive when compared to a Towers Watson analysis which shows that 70 percent of systems were less than 80 percent funded at the end of 2012.

The analysis of 599 Fortune 1000 companies also documented the changes in actuarial assumptions that pension fund managers have made in recent years. For 2012, the discount rate used to value liabilities varied from 2.7 percent to 5.5 percent, with an average of 3.94 percent.

Those figures were down from 2011 when they were between 3.5 percent and 6.3 percent, with an average of 4.68 percent. Since 1999, the average has fallen by about 50 percent.

Pension funds have seen a stunning turnaround since the depths of the Great Recession when assets values tumbled and low interest rates caused liabilities to spike. Such fluctuations posed a significant risk to pension funds.

Towers Watson reported that pension funds are in a better position to weather another market crisis. Measured by its Pension Risk Index, 62 percent of companies would have been likely to lose 3 percent of their market capitalization in a substantial downturn in 2013. A small number, 14 percent, were likely to lose more than 10 percent.

Against a backdrop of companies shedding costs by ending legacy medical plans for retirees, Towers Watson reported that 83 percent offered such benefits at the end of 2012.